“It’s Just A House Of Cards”
Some housing bubble news from Wall Street and Washington. “Stock markets around the world tumbled Wednesday as investors moved to reduce risk, spooked by the sharp sell-off on Wall Street amid mounting fears over rising mortgage defaults. ‘The rise in mortgage delinquencies in the U.S. has to be one of the most predictable events of the century so far, but has nevertheless provoked a further reaction in financial markets,’ said Paul Donovan, an economist at UBS.”
From Reuters. “H&R Block Inc. shares dropped on Wednesday after the nation’s largest tax preparer said it was boosting its third-quarter loss after cutting the value of a subprime mortgage subsidiary.”
“The nation’s largest tax preparer said a $29.2 million pretax cut in the carrying value of the mortgage business deepened its quarterly loss by $15.5 million to $60.3 million.”
“H&R Block said on Tuesday that it expects to delay filing its quarterly results with regulators after turmoil in the subprime mortgage market forced it to write down assets at its Option One Mortgage Corp. unit.”
From Bloomberg. “GMAC said yesterday that its home mortgage unit lost $651 million in the fourth quarter. ‘The residential mortgage market has been a tough area over the last three, four, six months for GMAC,’ CEO Rick Wagoner.”
“Subprime loan losses at the GMAC finance unit caused operating earnings to miss analysts’ estimates. ‘The falloff in GMAC combined with continued pressures in GM North America brought GM in well below consensus,’ Lehman Brothers analyst Brian Johnson wrote.”
“The perceived risk of owning GM’s bonds rose today, according to credit-default swap traders, as concerns about losses from the subprime mortgages pushed bond risk higher across the market.”
“Credit-default swaps based on $10 million of GM’s bonds jumped $40,000 to $455,000, according to London-based CMA Datavision. The contracts, used to speculate on the company’s ability to repay its debt, have risen more than $78,000 in the past two days, CMA prices show.”
From MarketWatch. “Losses on so-called Alt-A home loans are accelerating and could hit the value of lower-rated portions of some mortgage-backed securities, according to a study released on Tuesday.”
“These loans, known as Alt-A ARM IOs, have seen a four-fold increase delinquencies of at least 60 days, four times the level of similar loans originated in 2003 and 2004, according to the study by David Liu, head of mortgage credit research at UBS.”
“This ‘alarming’ deterioration could have dire consequences for some investors in the BBB- rated parts of mortgage-backed securities that contain these types of loans, but the market hasn’t priced these risks in yet, Liu warned.”
“Losses ‘could potentially wipe out most of the credit support on BBB- rated bonds backed by Alt-A hybrids,’ Liu wrote. ‘And yet we have not seen any spread movements that suggest investors are taking this into consideration.’”
“Liu’s study, which used LoanPerformance data from the end of January, is based on the housing market remaining relatively flat over the next few years. ‘If house prices fall over the next few years, everything in this scenario will be much worst,’ he said.”
“‘There is a 34% probability that the entire BBB- tranche might get wiped out,’ he wrote. ‘Similarly, there is a 17% probability that cumulative losses reach 300 basis points, which could make BBB bonds appear on the endangered species list.’”
“The percentage of mortgages that started the foreclosure process in the final quarter of last year rose to 0.54 percent, a record high. The previous high, 0.50 percent, occurred in the second quarter of 2002 as the economy was recovering from the blows of the 2001 recession.”
“Delinquency and foreclosure rates were considerably higher for higher-risk subprime borrowers, especially those with adjustable-rate mortgages. The late-payment rate for all subprime loans jumped to 13.33 percent in the fourth quarter, up from 12.56 percent in the prior period and the highest in four years. The delinquency rate for subprime borrowers with adjustable-rate mortgages was even higher; 14.44 percent, also the highest in four years.”
“‘Unfortunately, it appears delinquency rates will likely worsen before they improve,’ said Gina Martin, economist at Wachovia Corp. Economics Group.”
The Orange County Register. “Bill Spitalnick spent seven years reviewing appraisals for subprime loans, first at Ameriquest in Orange and then at Fremont Investment & Loan in Anaheim. Last year, he began to see more cases where the loans exceeded the home’s values.”
“‘The main problem was 100 percent financing and declining values,’ said Spitalnick of a situation that put the lender at great risk.”
“Subprime lending boomed by tapping into Wall Street’s mortgage securities market – now worth $6.5 trillion. This machine repackages loans into investor-friendly debts.”
“‘There was a global appetite for investing in subprime debt,’ said Stuart Gabriel, chair of the Lusk Center for Real Estate at USC. ‘New Century is an entity that couldn’t have survived – that can’t survive – without significant capital infusion from Wall Street.”
“This week, New Century said its financial partners were demanding it buy back up to $8.4 billion in loans, bringing the company to the verge of bankruptcy. Glenn Stearns, of Costa Mesa-based Stearns Lending, said as soon as one subprime lender’s financial backers pull out, others follow. ‘It’s just a house of cards,’ he said.”
“U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.”
“‘The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit, so we clearly want to look at that and legislate,’ Dodd told reporters.”
“Federal aid ‘would come at a cost,’ said Douglas Duncan, chief economist at the Mortgage Bankers Association. ‘It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’”
The LA Times. “On Tuesday, the chairman of the Senate Banking Committee speculated that millions could lose their homes. It’s scary stuff. But not so scary that anyone needs to raise the possibility of a federal bailout. This means you, Sen. Christopher J. Dodd.”
“Standing up for homeowners doesn’t take much political courage. And mentioning the American dream makes a nice sound bite for a senator running a dark-horse campaign for president.”
“But providing forbearance is a job for lenders, not taxpayers. Lenders got very creative when they learned they could profit by unleashing a flood of easy credit. If they want to remain solvent and keep Wall Street happy, they’ll have to be equally creative when it comes to refinancing sub-prime mortgages.”
“The Federal Reserve and the Office of the Comptroller of the Currency took little action in public to police the $2.8 trillion boom in the U.S. mortgage market, whose bust now risks worsening the housing recession.”
“The Fed, which is responsible for the stability of the banking system, didn’t publicly rebuke any firm for failing to follow up warnings on home-lending practices between 2004 and 2006. The OCC, which supervises 1,793 national banks, took only three public mortgage-related consumer-protection enforcement actions over the same period.”
“‘There was tension between the responsibilities not to mess up some banks’ businesses and the responsibility to consumers,’ said Edward Gramlich, a Fed governor from 1997 to 2005. The result, he said, is that ‘we could have real carnage for low-income borrowers.’”
“Officials at the Fed and OCC say their examination process was rigorous and resulted in private enforcement and correction of abuses.”
“The agencies say they aren’t allowed to disclose how many non-public actions they took between 2004 and 2006 that were aimed at protecting consumers from home-loan abuses. Private enforcement action ‘contains confidential supervisory information,’ said Susan Stawick, a Fed spokeswoman in Washington. The OCC considers the information ‘proprietary and confidential,’ said Kevin Mukri, a spokesman in Washington.”
“‘Making sure people understand what they’re getting into is very important,’ Fed Chairman Ben S. Bernanke said in Stanford, California, on March 2. ‘We’ve issued several guidances. We hope that they’ll be helpful.’”
“Federally regulated banks and Wall Street firms are often the financiers standing behind state-regulated mortgage lenders. New Century Financial Corp., the nation’s second-biggest subprime lender, includes Morgan Stanley, Citigroup Inc., and Goldman Sachs Group Inc., all regulated by federal agencies, among its creditors.”
“‘There is no question that mortgage brokers are on the street committing systematic fraud on the American homeowner,’ said Irv Ackelsberg, a Philadelphia attorney who testified at a Fed hearing last year in the city. He said there is a ‘lack of will’ on the part of the Fed to use its power to stop abuses.”
“‘There is going to be a fraction of people that get the wrong product and that is regrettable,’ Richmond Fed President Jeffrey Lacker said in an interview. ‘Should we do something to limit that probability? Well, we could, but it would also limit credit to people for whom that is the right product.’”
“Critics say the regulators’ private responses harm consumers by depriving them of information they might need to take action on their own behalf. ‘Borrowers hurt by an abusive practice have the right to a remedy,’ said Alys Cohen, a staff attorney at the National Consumer Law Center in Washington.”
“Ackelsberg told former Fed Governor Mark Olson and Consumer Affairs Director Sandra Braunstein that the subprime market was ‘fundamentally broken,’ and presented an example of a loan that left a Social Security recipient with about $10 a day to live on after she paid her mortgage.”
“He and other critics say the lack of public action is symptomatic of a too-cozy relationship between the overseers and the overseen, with consumers and the U.S. economy paying the price. ‘We have regulators almost competing with one another to be clients of the industry,’ said David Berenbaum, executive vice president for the National Community Reinvestment Coalition in Washington.”
‘the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’
And don’t forget the 30% who are renters.
Not me. I have a mortgage, have never been a nanosecond late on it, and, yes, I do VOTE!
all this bail out talk is nonsense. political bs because it can’t possibly be done. think about it. how long to bail out, one month, two months or just pay off the mortgages for these guys. the US treasury does not have a trillion dollars sitting around. maybe if we cut all the funding for Iraq, then we can bail all these guys out. that has a nice political sound bite to it. “fight the war at home first.” lol.
the Treasury has a printing press.
That primting press is already about to blow a gasket. Any more pressure and it seizes up.
Just tack an extra zero at the end of all our prices. This nothing a little hyperinflation can’t fix. All these people making 30K will be making 300K. Then they shouldn’t have any trouble paying their 700K mortgages, as long as they don’t drink too many $50 cups of coffee.
I eagerly await this. I’ll sell my gold when it hits $50,000 an ounce.
Excellent point, Rally Monkey. Let’s just play that game for a moment and say the feds print 2.5-5 Trillion worth of dollars to go to those who are effed. What impact would that have on the economy. First and foremost, hyperinflation. Money would be almost worthless. That gold you have. I wouldn’t even sell for 50K because dollars would be pointless. Euro or loonies, yes, but at that point, not dollars.
Also, SFHs would be pointless because homes would really have no value.
Bottom line is that creating another 3.5-5 Trillion of debt, overnight, would effectively kill the American economy and country. We would be telling the world that we will just run the presses whenever we feel like it to pay off debt. Heck, why not just print 10 Trillion dollars and pay off the old debt. Atleast we would only owe debt to the Fed Reserve Board at that point.
” the Treasury has a printing press.”
as does a bunch of Asian bankers..
http://www.iht.com/articles/2006/08/20/news/pyongyang.php
Easy on the renters. They subsidize the purchase of the landowners and they don’t get the write off that homeowners do. You can find plenty of situations where renters pay more taxes in proportion to their incomes than do homeowners at the same income level. I agree there’s a lot of irresponsible people out there, but there many responsible renters out there who will share the tax burden of any future bailout without the benefit of ownership.
“the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people”
Probably not. And, I bet that 93% of that 34% are old white folks… who vote. Compare that to the typical - I say typical - FBr. Who votes more?
I think it’s nonsense too. It’s really impossible when you get down to brass tacks.
I called Senator Dodd anyway, hope y’all do too.
I vote that Sen Dodd’s constituents pay for any bailout of the banks and FB’s
What about the alleged fraud in the housing debacle? Isn’t helping those “folks” (unknown numbers) somewhat like participating in their illegal act(s)?
How about this headline during the election cycle: “Dodd Squad Facilitates Fraud…”
Here you go folks. Let Senator Dodd know what you think…
http://www.chrisdodd.com/contact
Thanks, ddinoc. I just did email Dodd. I am frustrated, though, that CNBC has been asking people to comment on whether Fed should lower rates, and when I go to cnbc.com to try to answer that, I cannot find the poll. Anyone know how?
Dodd.. Senator from Connecticut
Hedge Fund hedquarters… Greenwich Connecticut
Yeh, he’s watching out for “all the little people”
I did my part and sent him one:
“Dear Sir,
Please stop your nonsense talk of bailing out the subprime mortgage mess. When houses stopped becoming homes and started becoming investments, that even poor people speculated with to get rich, then they no longer deserve any protection. The only we do need is prosecution and much overdue regulation of these predators that begin at Main Street and end at Wall Street. It’s saddening that you are just waking up to the fraud of all parties involved that has been going on for the last 5 years, but it’s time for these folks to pay the piper, and the pain is part of their healing process.
I wrote a letter to Senator Dodd too.
To summize, I explained how we practice fiscal responsibility and that we would not be sitting idly by while our taxes increased to bail out those that didn’t.
I also included this comment at the end:
I’m also wondering if I should begin researching for an Independent Candidate. I have never in my life considered an independent candidate. But, in their present form, the 2 political parties seem determined to ruin everything I’ve created for myself and my family.
We have many former presidents who were bank busters. It looks to me like its time to find another.
I wrote Senator Dodd, too:
Senator Dodd indicated the need of federal help for subprime borrowers near foreclosure. Could you tell me how much money the subprime lenders have put in Senator Dodd’s pocket, to avoid being stuck with the loss they generated due to careless lending? What is the price for a senator today? I am really upset about Senator Dodd.
Totally frustrated by Senator Dodd alike irresponsible politicians
Hi nick,
That’s just the point. The wars (and the greater part of US overseas basing) are simply not affordable. Derivatives hiding interest rate risk and QSPE joint ventures obfuscating default risk sharing on vanilla 30-year fixed mortgages among the GSEs and their counter-parties was obscuring the essential weakness in the US economy (as a driver of military strength) even before the private labels started getting silly with their non-conforming sludge.
For years I’ve been begging the GSE team at AEI to have a heart-to-heart with Tom Donnelly so he can jam his tank into reverse, but to no avail. Now we may be only months away from the SFAS 140 vehicles starting to unwind, when all merry hell is going to break loose. Des Lachman and Alex Pollock have invited Roubini and a couple of heavy risk-management types to a pow-wow just two weeks from today. Maybe Bert Ely will finally wake up and smell the spreadsheet. It may well be America’s last chance.
Are you John Meriwether?
Nope, but Nick Leeson is in rehab in Ireland and writing pretty good posts for one of the newspapers there (fwiw)
Your first mistake was in trying to have an honest conversation with those hacks at AEI. Greediest bunch of partisan tools I’ve ever seen collected under one tent.
I’d trust Peter Wallison with my life.
Thanks for the link to Sen. Dodd, ddinoc. I would strongly encourage all bubble-sitters to write him, as I suspect his office is being deluged by whiney hiney-holes about to lose their homes due to their own stupidity. I sent him the following letter:
Dear Senator Dodd,
I would respectfully ask you to reconsider your apparent view that the US government should bail out the roughly 2 million borrowers who are now finding themselves in financial difficulty due largely to their irresponsible use of credit. Although I have a decent income ($__K/yr), I have been renting for the past four years, because when I ran the numbers I simply could not justify taking on the level of debt needed to buy a house in a “bubble market.”
My wife and I have two young daughters. We live frugally and within our means. For years, we’ve watched friends and neighbors go on credit binges to buy new houses, SUVs, time-shares, vacations, etc. while we saved up for the day reality and fiscal sanity would re-impose itself on the American public. That day is now at hand. Now, when there is a real (and long overdue) prospect of home prices falling, those of us who practiced fiscal restraint and “did without” rather than take advantage of easy credit to buy homes we couldn’t afford, are being told we may have to ante up to subsidize the foolishness and irresponsibility of millions of our fellow citizens. This is manifestly unfair. If people can count on the Nanny State to shield them from the consequences of their own poor judgment, it will only encourage more of the same, while discouraging and even punishing virtues like thrift and deferred gratification.
Again, I ask you to consider the interests of those of us who lived within our means even when it meant deferring our dream of home ownership.
You never know so just to be sure, you better write or call your representative or senator. We have to fight this craziness on all fronts.
IMHO the problem is not in wanting/or willing to bail out the borrowers, The problem is that any bailout is going to go to the BANKS!!!!
The end lending institutions are the entities that need the bailout. Is Citigroup too large to fail? How about Bear Stearns or Goldman?
As I read this stupid legislation, I was reminded of “Cause of the Election” syndrome, 2004 = Abortion, 2006 = illegal immigration, 2008 = Subprime Bailout? If it turns into election syndrome then we do not have a thing to worry about. Any bills on illegal immigrants or abortion Yet?
And I doubt many FB’s vote.
How about, “And I doubt many FB’s voteD.”
If they can hang on long enough - doubtful - they WILL vote if they see a gravy train coming. Even if it’s just for the forgiveness on the 1099 they’ll be getting for their short sale.
Illegals can’t vote.
But, illegals do vote, in huge numbers, which is why both parties pander to them. Georgia recently passed a law requiring a photo ID in the voting booth for this very reason, and a judge struck it down as unfair to “minorities, ” who apparently couldn’t afford photo IDS, except, of course, those needed to cash welfare checks.
You mean El Card-o de Matricular Consular?
(VIVA MEHEEEEEECO!)
It’s not about the FBs vote. It’s about (1) helping to keep alive hosts so that banking industry parasites can keep on sucking their blood; (2) showing bleeding heart liberal voters with money for future Democrat campaign contributions how much these prezidential candidates care about the FBs; (3) having CYA against future political fallout (”I said something should have been done way back in March 2007…”).
William Galvin (MA) was doing something back in 2003, according to the Boston Globe. There was a consent agreement regarding IB conflicts of interest, which apparently was violated in the last four years by Bear Stearns and others. Now he’s talking about pursuing them again.
Where was NY?
(posting from the parents’ house in NE)
“…showing bleeding heart liberal voters with money for future Democrat campaign contributions…”
Always quick to blame the dems for something you assume might happen, but ever so reluctant to point out that this catastrophe was scripted, directed and produced by those reckless and irresponsible republicans…
“Federal aid ‘would come at a cost,’ said Douglas Duncan, chief economist at the Mortgage Bankers Association. ‘It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’”
Interesting thought from the brain of “Bankers” Inc.
This line of thinking makes me wonder… what percent of taxpayers who opposes the Iraq war would be willing to pay taxes to continue to support winning the war “no matter what” the cost?
Douglas Duncan isn’t so bad.
He sold and is renting while the bubble blows over.
tell the god damn banks who securitized all these BS loans to pay for it.
make the god damn banks who securitized all these BS loans to pay for it. Tell them to give there 2006 bonuses back and that should cover it
krazy_canuck,
I’ll vote for you buddy!
you can’t, but I will …
Shoudn’t be too hard to do. Sen. Dodd can just ask the buddies that contributed to his campaign to put up the money.
http://www.opensecrets.org/politicians/allcontrib.asp?CID=N00000581
I agree. Senator Dodd should go straight to the big investment banks on Wall Street for bailout money rather than Main Street USA. After all, it is these playas who are behind the subprime mess anyway; why not ask them to pony up for the mess they made?
The truth is that any bailout would only help the financiers, which might be the unspoken intention.
Truly, the best thing would be for all these “homeowners” (actually just debtors, they don’t own any equity) to lose their homes, and let the banks (and the financiers and bondholders upstream from them) suffer the consequences. But our government is unlikely to let that happen. In any case, our treasury doesn’t have enough money to save anyone besides fat cats, so that’s who’ll be subsidized. Just watch…
In case anyone in the press might be reading here, I want to make it really easy to see the list of contributors to Senator Dodd’s campaign coffers. This bailout proposal is making my blood boil! I hope someone in the MSM is bright enough to connect the dots and check out this story…
CHRISTOPHER J. DODD: CAREER PROFILE (SINCE 1989)
Top Contributors
1 Deloitte & Touche $194,970
2 Greenwich Capital Markets $183,000
3 Bear Stearns $162,850
4 Citigroup Inc $157,000
5 Goldman Sachs $147,516
6 United Technologies $124,550
7 JP Morgan Chase & Co $114,523
8 PricewaterhouseCoopers $113,850
9 Morgan Stanley $99,725
10 American International Group $97,338
11 Lehman Brothers $96,000
12 Ernst & Young $86,000
13 Prudential Financial $85,512
14 Credit Suisse First Boston $85,250
15 Time Warner $84,250
16 General Electric $78,280
17 Hartford Financial Services $78,150
18 KPMG LLP $72,290
19 UST Inc $71,400
20 UBS Americas $66,950
The only kind of borrower bailout that would be even moderately tolerable would involve relieving borrowers from deficiency-judgment liability, as California does for purchase-money loans. (Of course, many California borrowers have unwittingly thrown away this protection by refinancing.) That would have the effect of throwing the main cost of the coming bust on the lenders who precipitated it. The borrowers generally don’t have any equity in their homes anyway, so foreclosure will, if anything, reduce their housing costs (by forcing them to rent, in a market where costs are significantly lower than the costs of homeownership).
The fly in the ointment with this kind of idea is that it almost certainly violates the Constitution — specifically, the “obligation of contract” clause. (Article 1, Section 10: “No State shall…pass any..Law impairing the Obligation of Contracts….”
The Constitution, you say. What is that, exactly? Who operates under that old piece of horsehide? Didn’t you know, that thing is so 19th century passe!
The right to bear arms was not to allow hunting, it was written to allow the citizens overthrow an onerous government. Just an observation.
The D.C. Circuit just reminded us of that a couple of days ago.
I sure hope the government does not forget to go after the subprime lending kingpins in its zeal to punish (see the list of Senator Dodd’s campaign contributors above for some examples).
——————————————————————–
“Political news
March 14, 2007, 4:49PM
Government may punish subprime lenders
By MARCY GORDON AP Business Writer
© 2007 The Associated Press
WASHINGTON — The government is preparing to punish some subprime mortgage lenders under investigation for discriminatory practices, the Bush administration’s housing secretary said Wednesday.
The Housing and Urban Development Department also has suggested that the largest mortgage companies, Fannie Mae and Freddie Mac, consider giving strapped borrowers more time to repay their loans, Alphonso Jackson said at a House hearing.
There has been an alarming spike in foreclosures, especially among homeowners who took out subprime loans. These are higher-priced loans people with tarnished credit or low incomes who are considered riskier.”
http://www.chron.com/disp/story.mpl/ap/politics/4631617.html
Hey, Senator, looks like the common rabble needs to be shown Their Proper Place!
Tell them to give there 2006 bonuses back and that should cover it.
Give back the bonues from 2006 all the way back to 2001, which is when this whole mess got started.
AMEN!!!
Agree with all…the financial firms need to take their medicine. Only then can we be assured that they will use common sense in their future dealings (we can always hope, right?).
Send letters to Dodd, your representatives, newspapers, etc.
This “bailout” idea must be stopped immediately!
Here’s the enemy behind bailout legislation:
National Community Reinvestment Coalition (NCRC)
http://www.ncrc.org
Sorry if somebody has posted this already:
http://news.yahoo.com/s/nm/20070314/pl_nm/usa_subprime_reform_dc_1
The problem is that the FBs have a major advocacy group in their corner who has Washington’s ear.
Is it time to form our own advocacy group?
Hey Ben - want to go to Washington and be a lobbyist?
I seriously think we need to watch this closely and form our own advocacy group, made up of the readers of this blog, if it comes to pass. We cannot let this happen.
Again, another prediction made on this blog coming true.
I think it’s an excellent idea. I’ve said it before and I’ll say it again, I’m surprised the Gov hasn’t shut down the internet yet. This thing is like the anti-tower of babble. The only element missing is people getting up off their asses and taking this country back for Christ’s sake.
The internet is a hell of a lot more dangerous to gov than guns in the hands of it’s citizens. Both are good though.
LOL, Reminds me of “Beware of Strong drink, It may cause you to shoot at tax collectors and miss.”
I think we are assuming that this is a bailout for the individual home buyer, where in reality the individual that defaults is NOT in for a loss (or potential bailout), the company that loned them the money is. The homeowners that do go under had little or no resources (or investments) in the first place, so giving them money is really just transferring funds back to the sloppy bankers that created this mess. We are not bailing out homeowners, we are bailing out banks THROUGH homeowners. I would be interested who has their hand up Dodds ass to make him push such a bill.
I think Get Stucco answered that one with his major contributor list.
I see he put that up… Thanks CarrieAnn!!
Paying the taxes…… You won’t have a choice. Your voice to this insane matter will not matter. Even if it’s illogical the government will enforce changes for the “majority and good for the people”. Is it not those in power who looked the other way when the greedy lenders/ banks change the rules and lowered the loan standards with toxie loans we have now. The commissions/fees have been cashed and no returns possible by these “insiders”. I am afraid we will have to deal with it and the history books will record this if this is any satisfaction to anyone.
F Chris Dodd and his bailout.
Many good comments above but this bailout will be attempted like previous bailouts with the unconnected having their hands burned and the connected with a structured long term play that will be invisible to the average person. Of course this will have a hidden effect that will keep the sheeple running on the inflationary ever increasing treadmill the rest of their lives.
This may sound insane but in my mind the only real course of action is for people to eschew the dollar and buy gold. This will seize up the current system and force the powers that be to a sane monetary policy. That is why in the The Constitution it is stated only gold and silver to be used as money.It’s purchasing power does not rest on the government but the market. It is the ultimate control on a prolifigate government and our right as citizens.
The question to everyone is how long will you let yourself be ripped off while the irresponsible get bailed out?
That is why in the The Constitution it is stated only gold and silver to be used as money
No, it says that the states can make only gold and silver legal tender. The federal government, on the other hand, is authorized to “coin money”, i.e. create fiat currency. Whether the Fed ought to be doing it is another issue.l
No, actually “to coin money” had a very specific meaning that was current at the time the Constitution was written. It meant to convert precious metals into coin form. The government was never given the power to create fiat paper “money” by any legislation. Even today, it uses the “federal reserve” to do the dirty work rather than doing it itself.
This is classically inline with the Ben Franklin quote “Democracy is two wolves and a lamb voting on what’s for dinner.”
It is not even worth the poop it would take the $hit on this crazy notion of a bail out. These lenders and FB’s made their beds and got in them together, they can lay in them.
To the 34% who don’t have mortgages and the 30% who are renters, add this last group:
Those who do have mortgages but are paying them and plan to continue doing so no matter what the financial struggle involved. IMO, this group would be the most violently opposed to any kind of “help” for people who should now just foreclose and go rent.
This really kills me- the rent these people would be paying after foreclosure is more than likely cheaper and for nicer digs than they have now.
“The rise in mortgage delinquencies in the U.S. has to be one of the most predictable events of the century so far”
That just kills me, because it’s true. It’s just *so funny* that most people (including so called experts) didn’t predict it…at least not publicly.
“The rise in mortgage delinquencies in the U.S. has to be one of the most predictable events of the century so far.”
While most on this BLOG predicted it, not everyone will agree that it was predictable. You have to remember that the bank thinks that everyone still needs a place to live. That’s why mortgages were such safe bets for them…even for those with bad credit.
What was the answer for the adjusting ARM? Refi into another adjusting ARM. I just don’t think the banks thought about the potential of real estate prices dropping making the every 2 year refi impossible.
I am calling BS. Either these bankers were the dumbest to come out of business schools in decades or these clowns knew that they could make people lifetime debtors. I argues several months ago that was the real purpose of this. Just keep sucking as many as possible dry. Think about CCs, while they pile up huge amounts of money for banksters, isn’t nearly close to this scheme. What is that you say, CCs pile up 100 Bil a year, well look at this mess we are in. You are looking at 3-5 TRILLION in debt. The interest alone, if paid on this, was going to be an astronomical, once-in-a millenium, God send, windfall, cash cow that would make the mafia, the gov’t, and all the Rockerfellers, Kennedys, etc. wealthy families throughout world history green with envy.
These guys knew what they were doing. No one was saying, hey people need a place to live. They were saying, “Where is my 25K commission check this week.”
I am so pissed at this whole thing, not at you Andy, even if my rant seems that way. My anger increases daily as I read and listen to this whole mess unwind. While I don’t think there was ever a conspiracy among the banks, may be the Federal Reserve Board, to keep as many in debt for their lifetime, I think that as this wore on, many in the banking industry soon realized that maybe their was some possibility of that just happening, which wouldn’t be bad for business.
Look at it this way, hey know I have you for 30 years overpaying for some PoS and to top it off I will make 1-1.5 million on this deal. Also, don’t forget some of these clowns were also pushing 40 and 50 year Methusalah mortgages.
I will admit that in the beginning they may not have known, but eventually these guys figured out just what they were doing.
I’ve said the same thing Dan. Say you had a subdivision in 2000 where everyone’s average house payment was $1,000. Now, in 2007, the people in that subdivsion are paying $2,500 per month. For the next 30 years, the car dealers, the credit card companies, the local restaurants, and everyone else is missing a $1,500 piece of the pie…
I wonder how long before we read about the first FB visiting his mortgage company with a shotgun under his coat?
Again, said it before, that’s why Allen Greenspasm is a Knight, because he works for the Crown in the City of London and his mission was to destroy the US economy so that were colonial dollar serfs.
And yet, it’s the borrowers signature on that contract.
Too bad our public school system doesn’t spend a bit more on financial education and a bit less on union demanded bennies!
Exactly right mad_renter. What percentage of the population can tell you how money is created in our banking system? People need to quit depending on government to solve their problems and think for themselves.
Getting up from the TV and worrying about material possessions would be a good start.
What percentage of schools teach how money is created and how it was corrupted by the banksters in 1913? My guess is NONE, which is why folks don’t “get it” and will be blindsided with this fraudulent scheme we call fractional reserve banking.
I don’t happen to think it coincidental that the curriculum in our school system skips over these key issues.
That is one of the key advantages of the public skool system. Not to the public, of course.
Bad Andy- You really think the banks did not know that RE prices would drop eventually?
I think that, out of the whole population of ths US, it was the bankers all along who KNEW WITH CERTAINTY that prices would drop. Why do you think they’ve covered their a$$es with 20% downpayments in the past? And done due diligence with lending money for RE in the past?
Some deluded 20 year old first time homebuyers may not have known but these bankers knew, beyond a shadow of a doubt, that prices will fall. Prices have always fallen. No big surprise there.
“Yesterday, Galvin said he has also subpoenaed documents from UBS Securities LLC and Bear Stearns & Co. concerning their research on New Century and other firms. In an interview, Galvin noted analysts for both Wall Street firms had upgraded their recommendations on New Century at key points since February even as the California lender’s woes piled up and it said it would restate earnings.”
“‘The rise in mortgage delinquencies in the U.S. has to be one of the most predictable events of the century so far, but has nevertheless provoked a further reaction in financial markets,’ said Paul Donovan, an economist at UBS.”
Maybe there are two UBSs, or two divisions of UBS that don’t talk to each other.
Like I said on the weekend, like UBS as a put candidate.
But bad broker recommendations are common. I remember someone “downgrading” Sonus in 2002 with a target of zero (it was 20 cents at the time!) Of course that was the bottom and it went to 9 bucks from there.
“Maybe there are two UBSs, or two divisions of UBS that don’t talk to each other”
Shadow Banks?
Shadow gov’t statistics?
Shadow Fed Reserve?
Shadow Federal Gov’t?
Tin-foil hats is radiating gamma-rays big time today, must be an economic super-nova ready to go Kaboom!
“Yesterday, Galvin said he has also subpoenaed documents from UBS Securities LLC and Bear Stearns & Co. concerning their research on New Century and other firms. In an interview, Galvin noted analysts for both Wall Street firms had upgraded their recommendations on New Century at key points since February even as the California lender’s woes piled up and it said it would restate earnings.”
“‘The rise in mortgage delinquencies in the U.S. has to be one of the most predictable events of the century so far, but has nevertheless provoked a further reaction in financial markets,’ said Paul Donovan, an economist at UBS.”
Sorry if this is a double post, but it appears as though there are two different UBSs, or at least two different divisions that don’t talk to each other.
check out the articles posted earlier about Massachusetts investigating UBS on their upgrades in February, and now this from a UBS economist about how predictable this was. Whatever!
TheStreet.com assigns blame first and foremost to Chairman Al
http://www.thestreet.com/_tsccom/markets/activetraderupdate/10344345.html
Pretty good stuff.
Dow set to swoon under 12000, and there’s 3 more hours to trade—could be another grim day, folks.
My prediction: Dow goes back to the 10,000 level, which, in my IMHO, is where it belongs.
75% long.
I’m 71% long equities. I’m glad I have company as I’m getting nervous. I thought I’d have till May before I lightened up on equities.
misery loves company.
COT convinced me. There’s some good statistical reasons for being long too. I made a lot on the downside and playing the last bounce up, the Dow would have to go under 9000 for me to get hurt. Wake me up when it’s over.
Hey, txchick, I’m coming from LUV and you have taught me a lot, BUT my own soundbites accumulated over 35 years of investing..
1. “When In Doubt, Stay Out”
2. “The Trend is Your Friend”
Was the trend your friend in March of 2000 or October of 2002?
“He who picks bottoms ends up with stinky fingers.” LOL
I sold everything two weeks ago and started building short and put positions as the market had its dead cat bounce. You could tell there was fear and the weakness in the subprime/junk bond market gave it away.
you guys are just too pessimistic. just a few hundreds points and you think it’s the end of the dow. the dow’s day of wreckening comes around Oct/2007, when the one trillion dollars subprime is due to reset. this Halloween will be one scary day.
Halloween’s my favorite day of the year. Bring it on.
day of wreckening
I like the way you put it, Nick.
The “Nightmare before Christmas”
The night of the living dead.
things overshoot, I’m waiting for 9000 (or lower).
Put call ratio is going crazy, watching closely:
http://madisonhousingbubble.blogspot.com/
Already under right now (11978)
Look out below. Agree with Arizona Slim on the necessary correction . . . but I think it will mostly be a slow slide to get there.
Speaking of the market, there was a piece yesterday on Bloomberg that covered FTD’s, naked short-selling, and hedge fund manipulation. What’s with all the recent honesty? Especially since it comes a day late and a dollar short. Sure, thanks for the coverage after we’re totally screwed!
I suppose it is just a coincidence that JP Morgan arranged with several gold funds to lease up to 25% of their shares (to sell into the market?) prior to this show being broadcast. I heard this show was “parked” for over a year for unstated reasons.
PPT came back early from lunch today; intervention underway already at 1pm…
1365 S&P is a fibonacci retracment. Funny how those work despite the skepticism. Look at the low for the day.
Shorts may get their legs ripped off.
“Funny how those work despite the skepticism.”
Faith-based noise trading…
Fibonacci is just an exponential approximation. It’s like saying it’s a ‘percentage’ retracement. But it sounds fancier to use the name of a mathematician.
Sorry, it’s a button I have.
Crude little chart here but it’s a reverse H&S on the intraday.
http://finance.yahoo.com/charts#chart1:symbol=^gspc;range=1d;indicator=volume;charttype=line;crosshair=on;logscale=on;source=undefined
90% long. Jim Cramer’s yet to live down his call to bail out of stocks right at the bottom of the post-LTCM debacle, so he’s decided to tell his readers to hang in there this time around. I’m long because I think US stocks are cheap, relative to those in the major markets. In addition, a weakening in the US dollar should mostly help US companies competing overseas, which will boost their earnings.
This is why Boeing has been cleaning Airbus’s clock in aircraft orders. The strong euro means that Airbus’s employees are enjoying substantial boosts in their buying power - at least the ones left after the workforce is cut by 10,000. Interestingly enough, Airbus’s peak years coincided with the “bad” old days of the weak euro.
“U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today”
People on Mishs’ Blog are up in arms about this and for good reason. Let’s bail out the flippers since they aren’t gonna make any money anymore. You Americans must be so proud of your capitalist system at times like this
What about all those empty trailers in AR left over from Katrina?
Home is where the heart is.
You confuse the American economic system with capitalism.
In the end, the bail-out will not help FBs; it will help FLs along the MBS spectrum. How is a FB helped when 10 more years is added to pay off his deflating asset? It’s equal to 10 years of servitude, perhaps deserved in some cases.
Throughout all this bubble nonsense I’ve always had the thought that the “help” for the FBs would be continuous restructuring of existing loan in order to get them to keep their alligator, I mean house. Lender wins, FB thinks s/he wins…
It’s difficult to imagine a straight-up taxpayer bailout for the buyers who got sucked in. How would the bureaucracy separate the flippers who flopped from those who could legitimately be considered victimized by the siren song of the sleaze MB?
Many posters have commented that the bailout would most likely be directed to the moneyed class. But a token outreach to the FB contingent will be attempted, if not actually implemented.
Want to see a real train wreck? This hurts to even read!
http://consumers.creditnet.com/Discussions/credit-talk/t-newbie-need-help-hubby-filing-ch-7-bk-just-got-served-again-65655.html
LOL
“Want to see a real train wreck? This hurts to even read!”
She should call Suze Orman. LMAO
““Want to see a real train wreck? This hurts to even read!””
Oh man, NYCBoy is going to love this story.
Multiple that x 1,000,000 or so people and it paints a grim, yet accurate picture.
Notorious,
Not 1,000,000. Try, may be 10,000,000. Look at the Fed’s quarterly report of debt in this country. I don’t have link, but someone linked to it here last week. This country is in some serious trouble with its debt load, personal, corporate, and gov’t.
I know it sounds sad, but this kind of stuff makes my blood boil:
“We have about 65,-75,000 in equity in the house that we can’t touch…we tried everything to take out the equity and at least pay off the debt but our scores were too low…so we are left at BK. The market is horrible here and the realtor I spoke with said it would take 4-6 months to sell our home if we did that. We need a bigger house (we bought this with 1 child) and I know if my score was higher we could sell this house and buy a bigger one with a lower payment but it doesn’t seem possible.”
Ummmm, how about selling the house and RENTING for a while, until you can rebuild your credit?
How about not financing a NEW car to replace the one you have, and just keeping the old one? And when the old one gets too old, how about *buying* (NOT financing) a “pre-owned” (USED) car. And get rid of cable TV.
“We did not know about the ups and downs of commission and he was soon making 7-8,000 a month. We got in WAY over our heads spending and then BAMMM bad months… he wasn’t even making the 2,000 he was being paid as a draw”
Next time, save the windfall, don’t spend it like it grew on trees.
Peace out.
I agree. I’ve got a seven figure investment account and I’ve been renting for the past three years. I sold my last place and thought the market was too overpriced to buy again. Why is it so hard for these people to understand that renting might make more financial sense right now?
The link is broken (for me)… how big of a house does she have now, and how many kids?
I feel like a real champ after reading that, I was gonna’ recommend moving to Costa Rica but I didn’t have the heart
Stupidity is soooo freaking expensive.
Insurance @ $500 a month !!! WTF GO TO ANOTHER STATE !!! Here in Illinois mine is ~ 700 A YEAR, for a 1900 sq foot home. Florida is going to bleed them, what a shame
I’m in fl and my insurance is $1200.00 a year, 2000sq ft
Homer: I have a great way to solve our money woes. You rent your
womb to a rich childless couple. If you agree, signify by getting indignant.
Marge: Are you crazy? I’m not going to be a surrogate mother.
Homer: C’mon, Marge, we’re a team. It’s uter-US, not uter-YOU.
Marge: Forget it!
Mind me, my blood is boiling too WHAT ARE YOU DOING LEASING CARS !!!! HOW SILLY ARE YOU. DON’T YOU UNDERSTAND THAT OVER THE LONG HAUL YOU WILL HAVE A NEVER ENDING STREAM OF PAYMENTS!! Where is your common sense ! The ‘95 Tahoe was payed off in ‘98 and I have had a 9 YEAR free ride. Common sense says buy the stupid thing (new | used) AND GET OVER IT !!!
Bluster & vent off
Shouldn’t they teach the kids not to lease, pay off your credit cards every month, don’t do timeshare OR ARMs ?
I am not sure we could afford even a house to buy (we could only afford) renting
So you rent.
I love the question about finding a way to declare bankruptcy, then sell the house and finally pocket the proceeds. Oh and she also want to repair her credit.
Doesn’t the whole thing smack of that “Suzanne” commercial? She talked him into that mortgage and now he’s barfing from the stress of it all! She’s worse than a dirt sandwich, btw, worrying about getting a bigger house and new car when they’re in such a pickle.
I don’t understand people who procreate three times when they don’t have the income to support the kids. Good grief. If you can AFFORD to have kids and stay home then do it. If you can’t afford it, don’t do it. + Don’t buy chit you can’t afford!
`Systematic Fraud’
“There is no question that mortgage brokers are on the street committing systematic fraud on the American homeowner,” said Irv Ackelsberg, a Philadelphia attorney who testified at a Fed hearing last year in the city. He said there is a “lack of will” on the part of the Fed to use its power to stop abuses.
Fed officials defend their approach, saying that over- zealous regulation might cut off credit to people who need it most.
“little old lady got refinanced late last night
mortgage brokers of California again”
“I saw a mortgage broker running through the streets of east LA
looking for people that were bent over”
“you better stay away from him
he’ll rip your equity out jim”
- Warren Zevon (RIP)
… from the song “mortgage hyena in California”
“Stop, hey what’s that sound? Everybody look what’s going down.” (From old 60’s song)
The sound is the stampede of little mortgage broker cockroaches to get in on the next boom in sleazy unregulated jobs—Debt Collection.
What’s going down –without a life raft –is the American Consumer.
Fed officials defend their approach, saying that over- zealous regulation might “cut off credit” to people who need it most.
Good defense by FED officials…as of 3-14-07…lots of subprime lenders around to chew on low credit asses.
They are simply brilliant.
Who needs the credit the most? Is it flippers who bought ten houses in Phoenix McMansion tract home developments? Or FBs who bought houses that cost over 10X their annual household incomes? I hope the Fed sheds light on which victim group they are trying to help.
Happy Pi day!
How come we still have clowns on CNBC calling for a bottom “soon” in housing, and saying that the slump won’t have a material effect on the general economy? Aren’t these people supposed to be smarter than me?
I agree ! What a bunch of cheerleading clowns ! Almost as bad as DL himself.
Yesterday Cramer was saying that the problem taking the market down was only subprime lenders and that the market had it all wrong to sell off the rest. Apparently he doesn’t realize that Joe Consumer matters a great deal to the market too !
With respect to Mr. Cramer, keep in mind he arrived on Wall Street in the very early 80’s, fresh out of school. His entire career has coincided with the greatest stock bull market in history. The man has never experienced a deep, prolonged bear market. The latter are just as much a part of the natural order of things as the former. It is difficult to grasp when one’s own personal experience suggests it ain’t so. Hold on to your wallets….
And in 1996 while many felt that the market should/would take a breather he was saying DOW 12,000 by 2000. Of course in 2000 he was saying DOW 15,000 by 2002.
“Aren’t these people supposed to be smarter than me?”
No, they aren’t smarter, they are just more willing to lie then you are.
Of course if they don’t lie then I bet they will be looking for a new job and worrying about how to pay for their own mortgage.
“Aren’t these people supposed to be smarter than me”.
Tim916, I used to harbour the same illusion and hang on to their every word like its straight from the gospels. However I have now seen the light and guess what? These guys are not smart enough to tie your shoelaces, but they are very good at tying people up in a web of lies and robbing them blind.
LOL txchk, the best paragraph in that wreck is:
“I am a massage therapist and I work for myself on his day (one a week) off goign to a few regular clients(his co workers) homes and I make around 100$ each. Usually only brings 3-400 a month. I also sell on EBAY and have been doing well since the foreclosure(motivation maybe) and have made 1,000=1500 each month for the last 3 months. so our total income for the month should average to be around 5500-6000…unless he has a bad month then it is 2500-3000.”
I hope she knows how to give “happy endings”, as she will really need to “enhance” her services to stay afloat. In fact, that may be the upside to this whole implosion—really cheap massages from hot ex-mortgage broker chicks.
Yeah, I got a kick out of that too. Always interests me to see these damsels in distress about to lose their houses, etc. but they won’t work. And I don’t want to hear any BS about kids.
“Federal aid ‘would come at a cost,’ said Douglas Duncan, chief economist at the Mortgage Bankers Association. ‘It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’”
NO NO NO NO NO NO NO, Senator Webb are you listening?? NO NO NO NO NO NO NO NO NO NO
I am a democrat and I say no.
no to privatization of profits and socialization of risks.
I just wrote both my senator and congressman. NO BAILOUTS! The executives of the companies that are in a mess need to step up to the plate and bail themselves out.
exactly
I couldn’t think of a better way to lose votes and recruit them for the other party - reward recklessness, and punish frugality.
Presidential candidate Dodd has a warped sense of values.
Very well said..
no to privatization of profits and socialization of risks.
I agree, but I am afraid that is exactly what they are going to do.
OK, just for argument’s sake, let’s jump to a parallel universe where there is no government intervention. How would this play out?
Mortgages default, and the lenders are forced to buy back the loans. When the lenders are insolvent, they go bankrupt. What happens to the defaulted mortgage? It’s now owned by the MBS holders? Do these investors now try to sell the much devalued MBS to cut their losses? Do they try to sell the foreclosed houses on their own to cut their losses? Are the MBS holders the final bagholders? (Of course, if these guys get a tax break for their investment losses, the rest of us taxpayers are still subsidizing their foolishness.)
Banks do not give you liberty or freedom. They offer a service that provides convenience. Without the credit created by banks, this “systemic failure of the banking system that must be bailed out for our lives to continue” would be a non-issue.
The American electorate needs to understand money, inflation, credit, and the financial system (at least the basics). Without this understanding, there is no way to know if Cramer, Bartiromo, Kudlow, Bush, Pelosi, Bernanke, Paulson, Reid, etc, are selling BS, truth, your interest, their interest, the countries’ interest, etc. It is coming slowly, but it needs to pick up speed before this mess unravels.
We’ll all be living with the legislation of the Congress for decades that cleans this mess up. Are you going to form your opinions and votes based on what a salesman says, or based on what you can gather from mutliple sources, including economists from 100 years ago, 200 years ago, economists from the era that our Constitution was written?
Webb loves to offer up the free sht
he was doing the tour w the local big spenders recently
webb’s been a senator for two months.
flatff loves to talk the shit.
Owership Society = New World Order
Debt sucks!
They should have called it the PWNership society as in PWNED!
pwnership. That is true comedy. It is coming full circle
“Losses on so-called Alt-A home loans are accelerating and could hit the value of lower-rated portions of some mortgage-backed securities.” “This ‘alarming’ deterioration could have dire consequences for some investors in the BBB- rated parts of mortgage-backed securities that contain these types of loans, but the market hasn’t priced these risks in yet, Liu warned.”
That’s because these subprime and Alt-A morgages have been sliced, diced, tranched and re-sold so extensively and in such convoluted fashion that most “investors” have no idea that they even hold them. They think they have a box of Belgian chocolates, but it’s really just gift-wrapped dog poop!
And I’ll add this…
“These loans, known as Alt-A ARM IOs, have seen a four-fold increase delinquencies of at least 60 days, four times the level of similar loans originated in 2003 and 2004, according to the study by David Liu, head of mortgage credit research at UBS.”
I’m breaking my arm patting myself on the back for this one. Definately tip-of-the-iceberg. Subprime first, Alt-A next, followed by cracks appearing in A-paper.
Pass the popcorn, Neil.
Does the slicing,dicing etc. mean that risk is going to be showing up in all kinds of pension, institutional, and other assumedly conservative places?
That would be a “yes”.
Slicing, dicing, tranching and reselling did well to hide the risk. But when you give away money to stupid people with the impression that there are no strings attached, the risk is there nonetheless, and somebody will eventually end up holding the bag when the tide goes out.
these subprime and Alt-A morgages have been sliced, diced, tranched and re-sold so extensively and in such convoluted fashion that most “investors” have no idea that they even hold them. They think they have a box of Belgian chocolates, but it’s really just gift-wrapped dog poop!
Thanks, you just gave me an idea for an ebay business.
What bailout was there when people (myself) lost tons of cash in the dot.com bust? None. I refuse to bait out idiots who not only bought at the peak, but put their families at risk by getting HELOCS. etc. Too bad they can’t eat the Hummer.
LOL . . . never mind.
Sick and Twisted!
You can’t trade for a living and be normal in any way
Watching never ending thievery will do that to a person.
“What bailout was there when people (myself) lost tons of cash in the dot.com bust?”
Well, Alan G. tried to bail folks out by using the only club he had. Instead he just traded one bubble for another.
Exactly!!!
Isn’t that just reciprocity?? -
GMAC: “Just lost another $651 million in bad loans to Ditech!”
Now that’s comedy!
But they saved $50 per month on their auto insurance!
Love you txchick57….you are Hardcore with idiots and love animals ha ha lol
People are animals too.
Very, very funny, tx!
When in danger,
or in doubt,
run in circles,
scream and shout…
BAIL US OUT !
Good one!
Democrats advocate buying subprime votes:
Foreclosures involving homeowners who took out subprime loans from 1998 until 2006 could cost $164 billion, Dodd said, citing a December study by the Center for Responsible Lending in Durham, North Carolina. The government needs to provide at-risk homeowners “forbearance or something like that to give them a chance to work through and get a new financial instrument here that they can manage financially better,” Dodd said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a1×64z58hsB4&refer=home
Democrat, no ’s’ yet. kthx.
“The government needs to provide at-risk homeowners “forbearance or something like that to give them a chance to work through and get a new financial instrument here that they can manage financially better,’’ “
This has more to do with bailing out the big financial houses like Goldman Sachs then it does bailing out homeowners. After all if the homeowners get foreclosed on then all those bonds that Goldman Sachs and others issued will loose a lot of money.
Maybe this is why Paulson is so relaxed about the situation at hand and Goldman is so upbeat?
That’s why everyone needs to bombard their representatives and let them know how you feel about your hard earned money going to flippers, banks and FB’s. Let them eat their houses and mortgages
This has more to do with bailing out the big financial houses like Goldman Sachs then it does bailing out homeowners.
Just like the Mexico bailout some years back. Remember that? And it was done by a Democrat.
I’d put the odds of 100% wipeouts of the lowest tranch of Alt-A bonds at more than 34% for those backed by mortgages written at peak prices (2004 to 2006).
What would it take, a 10% loss to wipe out that tranche? I think you can guarantee a 10% loss in the home values from those years, perhaps double that, and more in some markets. Then you have foreclosure fees and costs. I think the higher tranches could get nicked here.
Well, looking at the article, he basically said as much:
“Liu’s study, which used LoanPerformance data from the end of January, is based on the housing market remaining relatively flat over the next few years. If house prices fall over the next few years, everything in this scenario will be much worst.”
“The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit, so we clearly want to look at that and legislate,” Dodd, a Democrat from Connecticut, told reporters in Washington after a speech to the National League of Cities.
Strange the Dodd’s good buddy Teddy Kennedy so far has been silent on what kind of bailout he will be proposing- oh I guess its because Kennedy was too busy this week whining about and calling for “investigations” “hearings” about INS actually carrying out an enforcement action (New Bedford, MA 300 plus illegals and plant owner arrested) in Massachusetts
To be fair Bush was trying to hand out downpayment money not too long aog ($400M for “downpayment assistance”). DC is infested with parasites.
The “legislation” will end up as the building of mega detention camps. I think some Halliburton subsidiary already has a conditional contract.
40 or 50 billion won’t bail out the FB’s but it will build some camps to put them in.
The National Guard will be used to round them up when they start to go wild.
What would you do if you got booted out of your house, lost your $15/hr job because of the recession, and it was clear to you that there was NO WAY you were ever going to get ahead?
And any medical care or food programs get cut. Even watching football/college b-ball won’t keep everybody passive. The veneer of society is actually pretty thin if Katrina is any guide.
Either that or everybody has to go into the Army and gets sent to Iraq/Iran or wherever…
Sad but True, you are so correct. I lived in Culver City during the riots after the King decision. I made the stupid decision one day when work let us do early because of the uprising to go through an area where I knew there was trouble. I have seen firsthand just how awful humanity can be when they are pissed. I know this wasn’t a worn-torn country. However, hundreds of looters and rioters in the streets running from store to store. It was a mess. Anyone who doesn’t think this can or will ever happen again isn’t paying attention to Santyana’s line about history repeating itself. Remember LA in the 60’s? King riots 30 years later. This crap happens when the fuse is lit and people are pissed. Just wait until J6P loses his job and house and health insurance. When this economy finally dies people are going to learn the hard way that there is no free lunch in this universe. They will also learn that for the most part the economy is debt-driven, consumer-driven, and one BIG FAT PONZI SCHEME!
OCDan, you are right. I came to LA in 92, just after the riots, and I remember how shaken everybody was. Less than 20 years later and it’s as if it had never happened. The more people who get “expelled” outside the margins of society, the messier it’s going to get. I think that’s a part of what the bailout people have in mind, aside from their own profits and the votes. It is very unfortunate, but we will just have to get used to the idea of living as if we were middle class in Latin America: under siege.
“Credit-default swaps based on $10 million of GM’s bonds jumped $40,000 to $455,000, according to London-based CMA Datavision….”
That is spillage.
I can imagine the CONGRESSIONAL HEARINGS now where each windbag Senator get his “opening remarks” with Teddy leading the pack where one-half the first day is taken up - on day 2 bad bad lenders called up, economists, experts, and of course THE VICTIMS themselves who were tricked into buying homes they couldn’t afford
the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’”
NO!
Nor would the renters be willing to support it, nor those who are not having trouble with their mortgages, nor those who are libertarian (it’s bailing out those who are too shortsighted for their own good), nor those who are communist (it’s giving to the rich bankers), nor those who believe in fairness or thrift.
I’m quite certain that if this came to an up or down popular vote without lies from the MSM, it would fail big time - at least 80%-20%.
H3LL NO!!!!!
Sorry if this is a repost, but Jim Rogers says RE is crash city !
http://www.reuters.com/article/newsOne/idUSL1470530620070314
I’m sure I remember an intervew with Jim Rogers a while back, like mid 2006, where he was asked about the strength of the US economy/commodities and housing and he said it was fine. It didn’t take him long to change his mind and get out the market. You have to give the man credit for putting his money and his house where his mouth is. (Although I know his house isn’t sold yet.)
Tweedle - I grew up in Mr. Rogers’ neighborhood (no snickering, please) - he bought that house in the late ’70’s when “everyone knew” New York City had gone to hell in a handbasket and that no one should EVER buy real estate there. He paid less than $100,000.
I don’t get how he thinks China would come out of a US crash looking pretty good. When our consumption goes into the toilet, China’s manufacturing base will shrink exponentially. That emerging middle class in China that will supposedly prop up internal demand will shrink right back into serfdom.
It’s just as big of a ponzi scheme over there too.
Thought I remember Rogers being very bullish as well. Glad I wasn’t imagining it.
Interesting to see such a doom-laden view on Reuters. This is pretty close to guns and canned goods.
That’s good news. People have accused me of being a gloom and doomer since the late 1990s. It will be great to go back to the early 1990s, when people thought I was a crazy optimist.
I read it optimistically! “China is one of the few countries in the world where I’m willing to sit out a 30-40 percent decline.”
I agree. I also believe the 40 - 50% drop is optimistic. I am looking for a drop to 1994 prices adjusted for inflation +1.4% - 10%. Then I will buy. That appears to be ~60% off current pricing.
Interesting to see such a doom-laden view on Reuters. This is pretty close to guns and canned goods.
The Great Depression lasted decades. I don’t think guns and canned goods ever became part of the picture. Even though owning guns and going to the local gun range were much more of the culture back then.
I love it when rich guys validate the sinking feelings I’ve been having for years about this global mess.
in FL, he’s half right already
off 25% in some areas
errr… what if he means *another* 50% ! After all, bubbles don’t burst until the liquidity dries up and that only happened last week. Can you imagine how bad the sales numbers will be when people can’t get mortgages ?
One thing to keep in mind about Rogers, he is not a “gloom and doomer” by any means. He has a well-deserved reputation for calling things like he sees them, which often means pounding the table with his fist when it’s time to buy - houses, stocks, commodities - it doesn’t matter. Everything is cyclicle in his world, including credit.
Read his books - you will be enlightened, if not entertained.
Rogers makes some of us doom and gloomers look like optimist. He was right about China and the commodity boom, however.
In reality the size of problem at this point is way beyond any ‘bailout” and the “victims” are very diffused - many simply being people who wanted houses that they had no business buying - however this won’t stop the pols from windbagging this thing to death
Next I suppose flippers will be bailed out - if they are income challenged
How ’bout demanding that subprime buyers get all the “savings” from no-interest ARM loans they got in the first ew years tacked on to any subsidized government loan….seems only fair—OR, if there is a bailout, the government should automatically pass on any borrower who’s screwed because they HELOC’s themselves to death.
In the end it will take the form of some sort of income tax credit on income people don’t have in the first place because of the recent reset on their mortgage. A bandaid on a blown out artery.
“The percentage of mortgages that started the foreclosure process in the final quarter of last year rose to 0.54 percent, a record high. The previous high, 0.50 percent, occurred in the second quarter of 2002 as the economy was recovering from the blows of the 2001 recession.”
That statement is disturbing on several counts -
- Apparently the 2001 “recession” (weren’t the numbers later restated to claim that a recession never happened?) was a lot worse than most people realize.
- It’s amazing that the previous high for foreclosure rates was in Q202, given that interest rates were already incredibly low by then. I would imagine the then-recent rapid decline in rates was driven in part by the peak in foreclosures then - one would think that someone about to be foreclosed on would have taken advantage of the new low rates and refinanced, especially given that home prices were already significantly on the upswing by that time.
- Now the foreclosure rates all already and that level and climbing faster every day, and that the Fed has given no indication of a desire to lower rates - this bodes very poorly for any near-term peak of foreclosure rates. They’re going to bust through the record this quarter and not even look back. I’ve been personally tracking #’s for the past few months, and indeed the rate of incline is still increasing.
A apt metaphor would be a river flood. With normal floods - by the time the river hits previous high levels it has already stopped raining and the river is slowing its ascent; eventually peaking and descending. This time however the river is now hitting it’s all-time high-water mark, and it’s now just raining harder!
Let it go, almost 2PM, there comes PPT to the rescue.
Hyena glutton lunch almost over…
now accepted as truth
Yahoo! Marquee
Personal Finance Home Prices: No Quick Rebound
CNNMoney.com
Don’t hold your breath — it could be years before housing prices regain the peaks seen before the current stumble. Find out why.
“Don’t hold your breath — it could be years before housing prices regain the peaks seen before the current stumble. Find out why.”
Hmmm…if voodoo financing goes away once & for all, we may never “regain the peaks”.
Last Updated Wednesday, March 14, 2007 11:03 AM CST
——————————————————————————–
Option One Defaults on Covenants
Production for the fiscal third quarter ended Jan. 31 was $6.0 billion at Option One Mortgage Corp., according to a filing with the SEC Wednesday by its parent company. Volume fell from the prior quarter, the filing said. Option One did not meet the minimum $1 million quarterly net income for four consecutive quarters as required in covenants in eight of its committed warehouse facilities.
——————————————————————————–
National City Originations Off
Originations at National City Mortgage were $3.4 billion during February, according to an SEC filing Wednesday. The month was worse than January, the filing said. The majority of February’s business was originated by its direct lending unit.
——————————————————————————–
Alt-A Rumblings
The Alt-A mortgage sector is showing an increase in delinquency comparable to that in the subprime sector, according to a report by UBS. Alt-A loans originated last year are on track to be one of the worst vintages in recent years, the report said. The poor performance resulted from these loans having the highest percentage of silent seconds, the highest combined loan-to-value and the second highest low doc percentage of all Alt-A loans.
——————————————————————————–
Subprime Layoffs at Countrywide
Countrywide Financial Corp. cut 108 sales positions Monday, a spokesman told MortgageDaily.com. The layoffs occured in its wholesale division’s specialty lending group, he said. The reduction reportedly reflects recent market changes.
Last Updated Wednesday, March 14, 2007 11:03 AM CST
Option One Defaults on Covenants
Production for the fiscal third quarter ended Jan. 31 was $6.0 billion at Option One Mortgage Corp., according to a filing with the SEC Wednesday by its parent company. Volume fell from the prior quarter, the filing said. Option One did not meet the minimum $1 million quarterly net income for four consecutive quarters as required in covenants in eight of its committed warehouse facilities.
——————————————————————————–
National City Originations Off
Originations at National City Mortgage were $3.4 billion during February, according to an SEC filing Wednesday. The month was worse than January, the filing said. The majority of February’s business was originated by its direct lending unit.
——————————————————————————–
Alt-A Rumblings
The Alt-A mortgage sector is showing an increase in delinquency comparable to that in the subprime sector, according to a report by UBS. Alt-A loans originated last year are on track to be one of the worst vintages in recent years, the report said. The poor performance resulted from these loans having the highest percentage of silent seconds, the highest combined loan-to-value and the second highest low doc percentage of all Alt-A loans.
——————————————————————————–
Subprime Layoffs at Countrywide
Countrywide Financial Corp. cut 108 sales positions Monday, a spokesman told MortgageDaily.com. The layoffs occured in its wholesale division’s specialty lending group, he said. The reduction reportedly reflects recent market changes.
“Let it go, almost 2PM, there comes PPT to the rescue.”
funny, guess they want to bleed the tiger slowly instead of lopping off its head.
Lot of damage inflicted already. I’d be shocked if 1365 S&P didn’t hold at least on a closing basis.
the worst part is having to hear Kudlow, Cramer, and the “fast money boys”. Pardon me, I need to puke in the trash can…b right back…damn, shredder has no openings wide enough…
The PPT were right on time today just as you called it, Mark. Another interesting thing today:
My broadband was connecting at a crawl most of the day and MarketWatch kept disconnecting instead of updating. I think there were lots of nervous people online this morning. Now that the markets are up, my connections are speeding right thru.
When is FNM going to fess up and tell us how much we owe?
I think the plan is to just keep playing mum on the FNM black hole balance sheet until the next housing boom (scheduled to begin later in 2007…)?
Video from Fox5 news in DC reporting on “Mortgage Mayhem”
Click on the following link and then within the article click on the ’sidebar’ item ‘video.’
http://www.myfoxdc.com/myfox/pages/Home/Detail?contentId=2662451&version=2&locale=EN-US&layoutCode=TSTY&pageId=1.1.1
I will be sure to share this video with my ‘in denial’ friends. I find that video sometimes makes it sink in better than an article.
Kass
Kass: Four to Blame for the Subprime Mess
By Doug Kass
Street Insight Contributor
3/14/2007 10:38 AM EDT
3/14/2007 9:27 AM EDT
As I mention in my piece below, in time the broad-line money center banks stand to benefit from the carnage in subprime lending.
I will be adding to JPMorgan Chase (JPM) ), Bank of America (BAC) and Citigroup (C) longs on any further weakness.
My visceral feel is that we have an up day today based on the magnitude of the blood letting yesterday.
Long JPM, BAC, C
3/14/2007 8:52 AM EDT
There are four main culprits responsible for the expanding subprime debacle that threatens to upset the ‘Goldlicks’ scenario so many are trumpeting. I’ve listed them in descending order of importance — and ranked by school grade!:
Culprit #1: Former Federal Reserve Chairman Alan Greenspan was no smarter than a fifth grader.
Greenspan did two big things wrong.
First, the former Fed chairman took interest rates far too low and maintained those levels for far too long a period in the early 2000s, well after the stock market’s bubble was pierced. (Stated simply, he panicked).
The Fed’s very loose monetary policy served to encourage the new, marginal and non-traditional home buyer — the speculator and the investor, not the dweller — to embark on a speculative orgy in home purchases not seen in nearly a century.
Over time, home prices, especially on the coasts, were elevated to levels that stretched affordability well beyond the means of most buyers. Ultimately, despite relatively strong employment and low interest rates, the residential housing market crashed hard.
Second, Greenpsan suggested — at just the wrong time and at the very bottom of the interest rate cycle — that homeowners retreat from traditional, fixed rate mortgages and turn to more creative and floating rate mortgages — interest only, adjustable option ARMs, negative amortization, etc.
He said this in February 2004 at a Credit Union National Association 2004 Governmental Affairs Conference:
“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”
One year later Greenspan continued the same mantra and cited the social benefits of the financial industry’s innovation as reflected in the proliferation of the subprime mortage market.
A brief look back at the evolution of the consumer finance market reveals that the financial services industry has long been competitive, innovative, and resilient. Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country. With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. The widespread adoption of these models has reduced the costs of evaluating the creditworthiness of borrowers, and in competitive markets cost reductions tend to be passed through to borrowers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10% of the number of all mortgages outstanding, up from just 1% or 2% in the early 1990s…We must conclude that innovation and structural change in the financial services industry has been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means. Without these forces, it would have been impossible for lower-income consumers to have the degree of access to credit markets that they now have. This fact underscores the importance of our roles as policymakers, researchers, bankers, and consumer advocates in fostering constructive innovation that is both responsive to market demand and beneficial to consumers.
But even as Greenspan was taking interest rates to levels that encouraged the egregious use of mortgage debt and exhorting the opportunities in creative and variable mortgage financing, there were some smart cookies out there who recognized the risks; here are quotes from two of the smartest who warned of the danger in the mortgage market.
When I took economics in World War II, and we were studying the Great Depression, one of the reasons given were all the interest-only loans that came due. They were an indication of an economy getting into unsound lending. Ever since then it’s been a rule that when you go into interest-only loans, you’re very substantially increasing the risk of default.
– L. William Seidman. Former Chairman of the Federel Deposit Insurance Corporation and Chairman of the Resolution Trust Corporation
Our own Robert Marcin put it even more precisely (and vividly) in his prescient warning back in mid-2005.
If Greenspan had a clue (remember, he didn’t have one in the tech bubble, or maybe he did), he would jawbone the banking industry to tighten or even strangle lending standards for residential real estate. He should not kill the entire economy to slow the real estate markets. Now that bag people can buy condos in Phoenix with no down payments, maybe the Fed should get involved. You can’t expect mortgage bankers to do anything; they get paid to lend money. But like Greenspan’s unwillingness to raise margin rates in 1999, I expect him to do nothing until the market declines. Then, the taxpayers will be on the hook for the stupidities of the real estate speculators. Remember, I expect a sequel to the RTC in the future.
– Robert Marcin, Making Money Before Housing Crumbles.
Greenspan will go untouched and will continue to give speeches at $200,000 a pop.
Culprit #2: Irrational lenders like Novastar, New Century, Fremont General, Option One, Accredited Home, OwnIt Mortgage Solutions and others were no smarter than a sixth grader.
Many of these mono-line subprime lenders grew from nothing to originating billions of dollars of mortgage loans almost overnight. Their rush to lend and helter skelter growth relied on the candor of the mortgagees and not on common sense, prudent lending or reasonable underwriting standards.
The growth in subprime-only originators was irrational, but the industry will now be rationalized and the marginal lenders will go bankrupt. And, in the fullness of time, the more diversified lenders will benefit from their demise.
Culprit #3: Wall Street was no smarter than a seventh grader.
The role of the brokerage community in the packaging, warehousing and trading of mortgage securities is immense, with about a 60% share of the mortgage financing market. After tax shelter abuses in the early 1980s, junk(y) bonds in the late 1980s, overpriced technology stocks and ludicrous IPOs and disingenuous research reports in the late 1990s, one would think that Wall Street had learned its lesson.
It has not.
Defending the indefensible — despite the “policing” of the SEC and Gov. Spitzer’s initiatives — remains Wall Street’s credo. Time and time again, the major brokerage firms exist for the purpose of selling product (stocks and bonds), not for providing objective research or for the commitment to client’s profitability. The higher a market surges, the easier it is for Wall Street to peddle, and package, junk.
The magnitude of the potential gains are always too attractive and tempting particularly as product demand swells into another cycle excess, as it did in subprime. Astonishingly, even the obligatory emergency conference calls intended to persuade investors that all is well were superficial and failed to disclose the inherent conflicts that each and every multiline brokerage has.
The major brokerages will be litigated against — again. They will pay large fines but will proceed in business until the next bubble — which they will also capitalize on.
Culprit #4: The rating agencies were no smarter than an eighth grader.
The little-known secret in the subprime market is that the principal ratings agencies have been lax in their downgrades of subprime paper and securitizations. This should not be considered a surprise, because like their Wall Street brethren, they prosper from the rising tide of credit issuances. In doing so, like a teacher who has turned his back on a boisterous and disobedient class, those recalcitrant agencies — Moody’s, Fitch and S&P — have ignored the erosion in credit quality and abetted the rush and market share taking of subprime lending.
According to Jim Grant’s Interest Rate Observer, downgrades at Moody’s were even with upgrades in 2005. In 2006, downgrades/upgrades rose slightly to 1.19 to 1; this compares to the historical downgrade/upgrade ratio of 2.5 to 1. Importantly, until downgrades are issued by the agencies, investors routinely carry their investments at cost, or par — downgrades force investments to mark to market … and sell.
The rating agencies will likely go unscathed because they always do.
Programming note: I discussed the “four culprits” and my broader view of the subprime debacle on Aaron Task’s Real Story podcast last night.
Re: Culprit # 1
“The Fed’s very loose monetary policy served to encourage the new, marginal and non-traditional home buyer — the speculator and the investor, not the dweller — to embark on a speculative orgy in home purchases not seen in nearly a century.”
Kass is neglecting to mention that even “dwellers” speculated on home prices, spurred on by the “buy now, or be priced out forever” crowd, as well as illusory thoughts (greed?) about how much money they were going to “make” being an owner.
This was especially true in San Francisco during the FFR 1% era from midyear 2003 to midyear 2004.
*******
“Second, Greenpsan suggested — at just the wrong time and at the very bottom of the interest rate cycle — that homeowners retreat from traditional, fixed rate mortgages and turn to more creative and floating rate mortgages — interest only, adjustable option ARMs, negative amortization, etc.
He said this in February 2004 at a Credit Union National Association 2004 Governmental Affairs Conference…”
It’s nice to see a “name” calling Easy Al on this. The behavior I outline above that was occuring in San Francisco was definitely influenced by Greenspan’s comments in February of 2004. This was seen in lender and realtor behavior, as well.
Culprit # 1 - I like the ring of that for “panicked” Easy Al.
Thnx TxChick. You made my day
Kass: When I took economics in World War II, and we were studying the Great Depression, one of the reasons given were all the interest-only loans that came due. They were an indication of an economy getting into unsound lending. Ever since then it’s been a rule that when you go into interest-only loans, you’re very substantially increasing the risk of default.
At the time of the Great Depression, home mortgages had only recently been introduced. My understanding (from a book by Jim Grant) is that a lot of the mortgages featured interest payments (just like a bond) a 5-year term, and payment of the principal at the end. The understanding was that they would refinance when the principal came due. The problem was when home prices crashed, and buyers could not refinance for the amount of principal owed.
“There is a 34% probability that the entire BBB- tranche might get wiped out,” he wrote. “Similarly, there is a 17% probability that cumulative losses reach 300 basis points, which could make BBB bonds appear on the endangered species list.”
and there is a 99% probability that these Ph D’s and quant’s on Wall Street - who designed all these so so “sophisticated” risk shifting and “risk spreading” debt instruments and repackaged them trade for profits and to sell to Chinese and Japanese investors awash in U.S dollars - were idiots, because they are just other names for the same thing: namely lowering credit standards and letting it all hit the fan down the road
‘the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’
And don’t forget the 30% who are renters.”
——————————————————————-
and don’t forget the millions of FBers out there!
Like everyone, the idea of any kind of federal bailout is both abhorrent and laughable to me. As another post said, how long are you going to float themout-3 months? For a tiny percentage of people who hit hard times, like job loss, this might save them, but the majority of people are systemically in over their heads-the numbers do not add up for them, the only thing you could do for them is pay off a big portion of principal. I know that being foreclosed on and losing one’s house would be traumatic to a family. I don’t want to sound cold blooded, but for many of these people, it is the best thing that could happen to them-they are out from under a house they could not afford. Too often, this fact is put off and put off by people refinancing continually, tapping into credit cards to pay their mortage, getting ‘loans’ from family and friends, and just putting off the inevitable-when the game finally ends, they are actually worse off than if they would have been foreclosed on six months earlier. I mean it’s not like three months breathing space helps most of these people-where are they going to get an extra $1000 a month-cutting out Starbucks or packing their lunch? By the time of a foreclosure, most people have run themselves so into the ground that each month their financial situation is deteriorating.
I agree 100 pct.
I really want to put this foreclosure thing into perspective. Especially now that some politicians are sounding the alarm for help.
There used to be a lot of shame around indebtedness/bankruptcy/etc. in this country. But have we all noticed how that’s changed in the past few years? I’ve met a lot of people who declared bankruptcy and apparently felt it was a totally normal, acceptable thing to do. In a wierd way, some of them even seemed proud of themselves as if by declaring bankruptcy they had taken the bull by the horns and taken financially responsibilty for their situation.
So I think we can safely assume that for many of these people, they won’t be hanging their heads and feeling like a piece of $hit for the rest of their lives just because their house foreclosed.
Once you’ve got shame out of the way, what’s left? : You’ve got to move. You can’t live in that house anymore.
People move ALL THE TIME!
And some people, like victims of fires, floods and eartquakes,tornadoes, etc. DON’T get even a moments notice. Not a minute to prepare mentally, emotionally, physically for their move. THOSE people I feel for. And those people, unless they lit the match themselves before they went to bed that night, DID NOT CAUSE their own suffering.
These people who can’t pay their mortgage have had months and months of warnings about their impending move.
If the US Gov’t. couldn’t get it’s act together to get people off of rooftops and out of N.O. in a timely fashion, if they would not help THOSE people what the heck are we doing talking about helping these loser FB’s who have got to move because they bought a house that was way too expensive?
Disgusting beyond words that any pol would even bring it up after the Katrina debacle.
And yes, I do agree that the ONLY reason they are bringing it up at all is because they want to help out the F’d lenders. They could care less about the F’d borrowers. If they had cared at all about them they would have stopped things from getting this out of hand in the first place.
And the more these pols keep talking about this bailout, it will open a dialogue and they will be exposed for what they truely are: lender lovers . And that won’t help them get votes. It’ll backfire.
So if they’re smart, they’ll quit talking about it now.
Love that list you posted about Dodd’s backers, GS.
I just emailed Dodd to voice my displeasure at the bailout talk. I suggest you all do the same.
http://dodd.senate.gov/index.php?q=node/3128&cat=Opinion
Boy, you guys got me all fired up. I did write to Senator Dodd. This is only the second time I’ve done this. The last time I wrote to my senator begging her to vote no on the Irak thing. Not that it did any good. But, hell, at least I got to rant. Here’s what I wrote:
I read you are talking about a bailout for distressed home owners who got in over their heads buying overpriced homes. I am sure there are some cases that would merit some kind of help, especially those who were duped into loans that the lender knew were inappropriate for the borrower. Having said that, I totally oppose any kind of bailout that will support the current trend of privatising profits and socializing risks. I would only approve of some kind of aid to bankrupt borrowers so that they can start over with their lives (not for having them keep paying unpayable mortgages). There are many culprits in this mess, including lawmakers who looked the other way when this was brewing but something could still be done. However, the bulk of the responsibility (and liability) should fall on irresponsible lenders out to get a quick commission on no matter what high a risk because they could then turn around and sell that risk to someone else. If you really want a return to normalcy and home affordability in this country. If you really care about the future of the children of this country, LET THE CHIPS FALL WHERE THEY MAY. Let the lenders foreclose on their victims and get a few cents for every dollar. Let the holders of mortgage backed securities learn a little more about the relationship between risk and high returns. The borrowers will be able to declare bankruptcy and start over with a very hard lesson learned, one that our schools have failed to instill in our children, something we have done at our own peril. Any bailout of greedy and irresponsible lenders and their backers will be seen by the electorate as what it is: pandering to the moneyed class at the expense of the deepest values of our democracy and our economic system, which are both based on personal and institutional responsibilty.
Excellent letter, Cassiopeia. Hopefully whatever intern filters his mail will make sure the Senator reads it.
They are thinking about giving us renters in Florida up to a $100 month subsidy.
“House Democratic leaders have suggested, among other options, giving renters up to a $100-a-month state subsidy as a way to make housing more affordable.”
http://www.sun-sentinel.com/news/local/southflorida/sfl-ftaxes14mar14,0,1115612.story?coll=sfla-news-sfla
Landlords will simply raise rents by a hundred dollars or more per month to exploit the situation. What a stupid idea.
Yeah, subsidizing college education with student loans really brought down those costs.
So the landlords know they can put the rent up another $100?
Just a matter of days now before Hillary Clinton starts talking about THE CHILDREN being affected by all these foreclosures - and her bailout solution
I’m no fan of Hillary’s, but she can mention children all she wants.
Still, keep those Republicans away from the kids…we know what the real agenda there is.
Even in an uncertain world during these uncertain times - what you suggest Harry - is a certainty. Get ready to pay up to help “the village”.
edge,
We’re already paying not just for “the village”, but “the country” on the other side of the world.
Well harry, if the republicans had not been so utterly reckless and irresponsible, we would not be facing this catastrophe.
HarryD, You know how much money we spend a week in Iraq? You know who got us there?
If you think just one party is responsible or irresponsible when it comes to money, you must be blind.
I think they are talking “bail out” as in the S&L crises. This was a bailout of the S&Ls and not the borrowers.
I have something on my mind that has been bothering me for quite a while. About six years ago, or so, my husband and I went into a bank–I think it was a First Union Bank–and when we opened a checking account there, the bank associate asked us how we would like to insure our account. I asked, “What do you mean, insure our account?” He said, “You get to choose who you want to insure your account–up to $100,000.” I said, “I thought all bank accounts were insured by FDIC already, up to $100,000.” He said, “No.” The kicker from Hell is what he said next. “You get to choose who will insure your account up to $100,000. You can choose FDIC, which is just an insurance company that can go bust if too many people make a run on the banks…..or you can choose Fannie Mae or Freddie Mac to insure your account.” I was totally confused at that point because I thought Fannie Mae and Freddie Mac were into the home loan business, not insuring bank accounts business. When I asked him about this, he just kind of smiled and said, “Well, if I had to choose, I wouldn’t go with FDIC since they are just an insurance company and could go bust if too many people made a run on the banks. I would choose Fannie Mae and Freddie Mac because people will always need a place to live, and they would be more secure since people aren’t going to renege in large droves on paying their mortgages.” Hmmmmmmm, I must admit that I have been haunted for a while about that conversation with the bank associate. In the past three years, we have switched banks, and our bank insures accounts using FDIC, so I didn’t have the choice of who would insure the account. I don’t even know if Fannie Mae and Freddie Mac are still insuring bank accounts anymore, but it sure as Hell sends an icy-cold chill down my spine at the thought of America’s bank accounts being insured by home loan organizations. What would happen if enough people DO default on their ARMs and other home loans to the point that Fannie Mae and Freddie Mac-backed accounts became worthless? Would the banking industry self-implode and money turn into useless garbage not even worth the paper it’s printed on? Just think about it! The American dollar, which is already weak globally, could be completely destroyed if no one had faith in it anymore. And the best way to lose faith would be if the banks collapse due to not having a reputable source backing up the money in everyones’ accounts! Talk about a nightmare scenario! Just imagine our country eaten up alive with foreclosures left and right due to people who can’t afford their mortgage payments, and add on top of this the idea that those of us who CAN pay our mortgages won’t be able to anymore since money in the banks have become worthless!!! I think people need to look into this and see if Fannie Mae and Freddie Mac are still insuring bank accounts! And if YOUR account at your bank is backed by this, well….I would say to switch over to FDIC, or even to just change banks! Does anyone out there know anything about this?
That’s pretty fantastical.
I wonder if the person you were speaking to was trying to get you to put your money in a money-market acct. that was invested in FNM securities. Usually those products are correctly identified as such, so I’m not sure why they would go through the trouble to say that the account was “insured” by FNM. I don’t think that a retail bank would have a commission structure for getting people into money market accounts, but I’m not familiar enough with how they work to say for sure.
Or, the bank employee you were talking to was, in reality, dumb as a post and this was how it was explained to them.
Not all banks are required to be insured by the FDIC or are members of the Federal Reserve. State Chartered banks have the option and many choose not to be insured. The predominance of -non Federal Reserve Member- State Chartered banks survived the Great depression (75% of the Federal Reserve banks failed in the great depression), many elderly who were in the depression still keep their money in State Chartered banks
Wall Street’s weak start adds to markets woe
By Tony Tassell, Peter Garnham, David Oakley and Robert Orr
Published: March 13 2007 18:56 | Last updated: March 14 2007 16:20
Wall Street renewed its downward slide on Wednesday, dipping below 12,000 as investor confidence continued to be hit by the crisis in the US subprime mortgage market.
Wall Street initially flirted in and out of positive territory but later later slumped as trading continued. Shortly after midday on Wall Street, the S&P 500 index was trading 0.35 per cent down at 1,373.17 while the Dow Jones Industrial Average was 76.10 points lower at 11,999.86.
The falls came after an earlier rout of European and Asian equities. In Asia, the sell-off was broad and deep on investors’ worries that the subprime mortgage problems could hit the US housing market and the broader US economy – a big export market for many of the region’s companies.
The Tokyo stock market plunged 2.9 per cent, Singapore by 3.3 per cent, Mumbai dropped 3.5 per cent, Hong Kong by 2.5 per cent and Shanghai by 1.9 per cent.
http://www.ft.com/cms/s/b0547428-d191-11db-b921-000b5df10621.html
I wrote my Congressman last night after reading the Dodd comments, and wiping the throw-up off of my shirt. I was adamant about NOT bailing out these people. I encourage everyone here to take 10 minutes to do the same - how else will they hear?
dd
“This week, New Century said its financial partners were demanding it buy back up to $8.4 billion in loans, bringing the company to the verge of bankruptcy. Glenn Stearns, of Costa Mesa-based Stearns Lending, said as soon as one subprime lender’s financial backers pull out, others follow. ‘It’s just a house of cards,’ he said.”
Who sneezed on the house of cards?
Buy back with what? If New is broke, then how the h3ll are they going to come up with the money? Sell off the buildings and land they own? Now that would be the ultimate twist of irony in this whole New mess!
I’ll take a supersize 10K sq. ft. building on an neg am, i/o, liar loan, please.
I also emailed Dodd to EXPRESS my thoughts about MY feelings on his ASININE statements…and I DIDN’T address it “Dear Senator”…a letter will follow.
http://dodd.senate.gov/index.php?q=node/3128&cat=Opinion
Man, the Beta on my QID must be 0.1 these days…works like a clock.
Why should congress limit the bailout to subprime? All I’ve been reading about this week is how this is spilling in to Alt-A and possibly even prime. Won’t those borrowers be pissed if only the subprimes are bailed out?
Where does the bailout end?
I’m waiting for the far left wing of the Democrat party to chime in with this one: forcibly extract equity from homeowners who have no mortgage or very conservative mortgages, to help pay down the FBs’ debt. This would equalize mortgage debt across society, erasing any unfair advantage between the savers and the financially-challenged. How very egalitarian: every one would be equally f*cked, although the FBs would be less so than they are now. This would have the added benefit of favoring the Democrats’ most loyal, perma-victim followers. What do you think?
lainvestorgirl:
Nothing would surprise me at this point.
I’m waiting for the right-wing republicans to develop some fiscal responsibility and put a brake on their reckless spending. I suggest they start by looking for that 12 billion they “lost’ while shipping us cash to iraq, then to the 2.5+ billion Halliburton admits to losing via waste. Then they could set an example by doing an honest accounting of the monthly costs of the wars in afghanistan and iraq, instead of the enron-style, off balance sheet shuffling they’ve been pulling so far. Then I would suggest repubs look at the massive boondoggle they have made of the billions for “rebuilding” New Orleans, that the prez stop bleating about his “ownership” society built on mountains of debt…oh forget it, trying to teach republicans to be financially responsible is like trying to teach a dog to ride a bike…never happen.
There is no difference between the Republicans and Democrats as far as wasting money goes, the only question is whether you want your hard-earned tax dollars wasted on Iraqis who hate us anyways, or on lazy Americans (and illegal aliens).
“There is no difference between the Republicans and Democrats as far as wasting money goes”
This is the response one expects from people for whom critical thinking is a skill nevere learned, never understood, never mastered.
spike66: This is the response one expects from people for whom critical thinking is a skill nevere learned, never understood, never mastered.
That’s a nifty way of avoiding a response to her assertion - calling her learning-disabled. I wish we could tone down the partisanship in the threads - it generates a lot of heat, but very little light.
Well they could get rid of the 250K/500K tax exemption every two years from profit on your primary home.
What do you think?
I think idiotic politics threads should be avoided here.
MSM giving that helping hand:
http://www.cnbc.com/id/17609112
“He and other critics say the lack of public action is symptomatic of a too-cozy relationship between the overseers and the overseen, with consumers and the U.S. economy paying the price. ‘We have regulators almost competing with one another to be clients of the industry,’ said David Berenbaum, executive vice president for the National Community Reinvestment Coalition in Washington.”
When I came to this country 12 years ago, at first glance it appeared that US was virtually corruption free. But over the years, I noticed lobby groups, campaign donations, dole outs, bail outs and now this complete fiasco. We in the US, have managed to institutionalize corruption and repackage it with euphemisms. We truly are a world leader.
sartre: “He and other critics say the lack of public action is symptomatic of a too-cozy relationship between the overseers and the overseen, with consumers and the U.S. economy paying the price. ‘We have regulators almost competing with one another to be clients of the industry,’ said David Berenbaum, executive vice president for the National Community Reinvestment Coalition in Washington.”
When I came to this country 12 years ago, at first glance it appeared that US was virtually corruption free. But over the years, I noticed lobby groups, campaign donations, dole outs, bail outs and now this complete fiasco. We in the US, have managed to institutionalize corruption and repackage it with euphemisms. We truly are a world leader.
I’ll have to disagree. The business of America is business. In many other countries, anything that isn’t explicitly allowed is forbidden, or regulated. In America, anything that isn’t explicity forbidden or regulated is free to go about its business as it sees fit. Other countries have political entrepreneurs who build regulatory empires that create new laws without end while creating endless new opportunities for graft and throttling their economies. Our entrepreneurs build business empires that create new products and enhance existing ones. Berenbaum want public servants to blanket American industry with regulations, and views anything short of that as corruption. He is entitled to his view, but the reality is that we are light on regulation not because regulators are corrupt, but because we’re not France.
No one has a problem with less regulation. The problem is that the existing regulations were not enforced and the regulators slept on the job, often knowingly. If that is not corruption, I don’t know what is.
I wonder if Senator Dodd wants to include the millions of illegals who were flipping also. That’s all we need now, bailout of illegals.
The only kind of bail-out that is possible is one where the lenders rewrite the loans of sub-prime borrowers at the lenders own expense if they can avoid a foreclosure . The only reason a lender would re-write a loan that a sub-prime borrower could manage is if they will lose less money to re-write the loan verses the cost of foreclosure . This is the best option lenders have to at least avoid some loss .The lenders would have to decern who could actually benefit from a rewrite of the loan verses a borrower who couldn’t . The lender would yeild less money on the interest rate but would save more because the property didn’t go into foreclosure . The lender might only rewrite the loan for 5 to 7 years just so the borrowers has enough time to get on their feet etc. This sort of re-write of a loan would only be possible for a owner-occupied house .
This sort of bail out would be at the lenders expense not the tax-payers . It would be in the best interest of the banks to do it to reduce loss .
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